Reviewing Metaverse’s Hottest Property Deals
Virtual real estate is getting increasingly popular as NFT collectors and digital land enthusiasts are willing to pay big bucks to own meta assets.
A plot of land was sold for a record $4.3 million in November 2021. This wouldn’t have been such a big deal in the real estate market had it not been, well, virtual.
The million-dollar deal was for virtual real estate on the platform The Sandbox. This land was purchased by a developer from gaming company Atari, better known for the epic game Space Invaders.
On a similar platform called Decentraland, a virtual real estate patch was bought for a whopping $2.4 million by crypto investor Tokens.com.
In December 2021, an NFT collector paid $450,000 to buy virtual land in the ‘Snoopverse’ and became neighbours with American rapper Snoop Dogg. During the same month, PwC Hong Kong bought a virtual plot on The Sandbox for an undisclosed amount.
There is a sudden virtual real estate boom globally through cryptocurrencies. Even as the metaverse or virtual universe has not yet fully evolved, million-dollar deals are being struck every month to buy digital properties. Individuals and institutions are buying virtual land online, sharing real estate space with celebrities, and even looking to host psychedelic therapy sessions on virtual land. And all this has happened in a matter of months.
This trend is only expected to get more prominent. Crypto asset management firm Grayscale said in a report that the Metaverse is estimated to be a trillion-dollar revenue opportunity, where real estate is a major part of this opportunity. There are secondary marketplaces where this virtual land can be purchased using cryptocurrency.
And one of these marketplaces is The Sandbox. This is a virtual world built on the Ethereum blockchain where players get a chance to build, own, and monetize their gaming experiences. This metaverse operates on a currency called SAND and properties are sold as NFTs. These NFTs can be purchased and later sold.
On Decentraland which is also a metaverse, users can buy land, visit buildings, walk around and meet people as avatars. The currency/token used here is called MANA.
Apart from Decentraland and The Sandbox, platforms like Axie Infinity and OpenSea offer users an opportunity to purchase real estate. Ether is the popular currency that is accepted by all the virtual land entities.
Meta land? Tell me more…
Just like you would buy a plot or house in the real world, the metaverse offers digital lands. You still need money to buy these properties. And that’s where Non-Fungible Tokens or NFTs come into play. On The Sandbox, the property is bought via LAND NFTs.
Land on the metaverse is slowly becoming as expensive as physical land. The reason lies in simple economics. Demand and supply. Since digital land is scarce, any sale happens at a premium.
For example, Decentraland only has 90,000 pockets of land, each measuring 2,704 square feet. All of these were auctioned in 2017 and 2018 and are now being resold.
There is no set formula for a per square-feet rate for land in the metaverse. It depends on how close it is to that particular universe’s centre, who are your neighbours, presence of luxury brands in your area and the infrastructure facilities.
So, a Gucci store in your metaverse property neighbourhood or Snoop Dogg’s residence proximity could mean that the prices will automatically be high.
In the real world, buying real estate at prime locations is limited. That’s not an issue in the metaverse where land can be added and expanded at the click of a button. So it is no surprise that entities such as Highstreet are offering luxury virtual metaverse condos and beach/island homes where players can also purchase furniture, accessories (using NFTs) as well as invite friends ‘home’ to watch a film together.
As a step forward, high-street fashion has also found its way into the metaverse that has unlimited space. Last year, designer brand Balenciaga brought digital fashion to the Fortnite/Epic Games platform. Firms such as Obsess are also building shopping platforms wherein retailers can set up metaverse malls, entertainment centres for customers.
So, it is not just buying property. One can book prime property, develop it into a shopping complex and later resell/rent it to the Guccis and Pradas. As high-end brands enter these properties, the meta real estate becomes an upmarket address that millions vie for.
Earning returns from meta land
Real estate on the metaverse has to be dealt with in the same way as physical land. What do you do after purchasing a plot? Develop it, add fixtures and furnishings and attract buyers.
As of January 5, the cheapest price for a parcel of digital land in The Sandbox platform was 3.7 Ether, the equivalent of $14,099, and on Decentraland it was 3.46 Ether, the equivalent of $13,211, according to Meta Metric Solutions.
Once a metaverse gets popular and more brands start ‘residing’ in your property, the rental income could potentially be increased by 10–20% every year.
Decentraland is the most popular platform right now, but plots stay expensive due to being scarce. But newer options like virtual property metaverse Upland are here to fill in the gap wherein properties can be purchased for as low as $150.
After buying the $150 land, owners would have to invest out of their own pockets to develop the property, add buildings (commercial/residential) and popularise among their circles to attract people to buy further. Remember that regular barren land is of no use and buying property in such metaverses would be a loss-making proposition.
Owners also need to think like real estate brokers to attract wealthy clients, both individuals and corporations, to buy/rent land that they developed. Social media listings and sales updates would help improve the land value.
In gaming platform Roblox, a Gucci bag resold for $4,115 as against its real-life price of $3,400. This means that if Gucci is a tenant in your meta property, you could start commanding a premium for the premises as their revenue spikes.
Picturesque locations, untouched land and touristy spots attract the big bucks. Today, platforms like SuperWorld even offer iconic monuments like the Golden Temple in Amritsar for $323 (0.1 ETH) or Eiffel Tower in Paris for $328,080 (100 ETH)for virtual purchase.
Similar to the real world, snapping up real estate when prices are sliding is a good way to acquire virtual land for investment purposes. Marketplaces like OpenSea are effective in helping discover newer and affordable metaverses.
Offline real estate principles state that investors must enter when the market is nascent and exit when prices start to summit. While virtual land deals in The Sandbox and Decentraland are peaking, new entrants to meta real estate can explore the more-affordable platforms and build their plots from thereon.
Where’s the future headed?
After purchasing virtual land, one needs to think like a real estate tycoon. This would include building houses on the land, setting up malls, sports complexes, building new roads to ensure constant revenue generation.
As a starter, users can experiment with Google Earth to create 3D versions of buildings and cities. Once a certain proficiency is reached, the next step is to develop and monetise the virtual worlds using specialised VR tools. Platforms like AltspaceVR, DiveReal, ForeVR, and Mozilla Hubs are a good starting point for setting up digital worlds on the metaverse.
An investor who buys properties on 57th Street in New York, Conduit Road in Hong Kong, or Grosvenor Square in London expects a high return on investment. Using the same logic, prime property at exotic, celebrity-inhabited, and undiscovered locations are bound to attract the big bucks.
